Going beyond Formula: Wattle eyes senior market and China expansion on back of blending and canning deal

By Cheryl Tay contact

- Last updated on GMT

Wattle plans to develop products outside of its infant formula range, including DFSMPs and products for the aged care sector. ©Getty Images
Wattle plans to develop products outside of its infant formula range, including DFSMPs and products for the aged care sector. ©Getty Images

Related tags: Infant formula, aged care, Australia, China

Wattle Health Australia is aiming to develop products outside its infant nutrition base and expand to the highly lucrative China market, following the acquisition of a controlling stake in Blend & Pack.

The company recently announced its decision to buy an additional 46% stake in the blending and canning specialist for A$46m from Mason Holdings subsidiary GL Food. This acquisition will be funded via a private debt placement managed by capital advisory firm Exotix Capital.

This will add to its existing 5% stake in Blend & Pack, which specialises in blending and canning dairy products and infant formula. Aside from Wattle, the independent firm’s Melbourne facility produces dried dairy products for a number of major domestic and global dairy firms.

The acquisition agreement also affords Wattle the right to buy Mason Holdings' remaining 29% interest in Blend & Pack at a base price of A$30m, plus option fees.

All-ages ambition

Wattle's executive chairman Lazarus Karasavvidis has said that the acquisition would make the firm a "fully vertically integrated Australian organic dairy company"​.

Speaking to NutraIngredients-​Asia, he said: "There's a reason we've spent in excess of A$100m in building up our vertical integration, so we can actually control the specifics around our organic powder.

"We are now in a position to be able to develop products whereby we control the quality, safety, and how the products are actually made."

He also claimed that Wattle now controlled around 80% of all fresh organic milk in the country.

At the same time, the company is in the process of building Australia's first and only dedicated organic nutritional milk spray dryer in order to better support its vertical integration.

These developments will also help to drive the firm's NPD, especially outside the infant nutrition category, which Wattle has operated in exclusively thus far.

Karasavvidis said: "Although we initially concentrated on the infant nutrition space, what we as an organisation have always been working towards is being a 'whole of life' nutrition company."

"We're looking at a range of FSMPs (food for special medical purposes) for oncology recovery, heart disease and diabetes.

"We'll be releasing products for the seniors' market as well. We want to broaden the variety of applications for our products, beyond just infant nutrition."

Chinese channels

According to Karasavvidis, Blend & Pack's accreditation in China may very well get Wattle's foot in the door in the Chinese market.

He said Blend & Pack's was the only facility in Australia that had had its licence renewed for a period of four years, had organic certification for both China and Australia, and had HACCP certification in China.

This puts Wattle in an advantageous position, as it allows the company to more easily make products that adhere to the complex regulatory and legal requirements in China.

Karasavvidis said: "We've been looking to sell our product range in China, and we've been looking at different demographics for different types of products.

"As an example, a lot of our infant nutrition products will be sold through the mother and baby channel, and to a lesser extent, the pharmacy and supermarket channels.For our aged care products, we'll be looking at mainly the pharmacy channel, and to a lesser extent, the supermarket channel.

"Different markets require different entry points, and we'll be looking to take advantage of the relationships we have in place to create a pathway for the new products we'll be launching to market."

He further revealed that Wattle had 'formed relationships' on the daigou​ platform, and intended to sell its products via cross-border e-commerce (CBEC).

However, he was also quick to emphasise the importance of a physical presence for Wattle's products in China — the firm is working with local retailers to take advantage of the general trade pathway and support brick-and-mortar stores in China, as it believes that is the 'strongest pathway' in the long term.

"There are lot more touch points in general trade than in CBEC, and more importantly, it means we have to meet certain standards that are specific to and tailor-made for the Chinese from a health perspective.

"It'd be fair to say we feel the need to look at both sides of the equation and cover all our bases, not just general trade or CBEC."

Wattle received approval in August 2018 to sell baby food in China, but has yet to obtain the State Administration of Market Regulation (SAMR) accreditation required to export infant formula to the country.

Apart from Australia and China, Wattle's other key markets are India and South East Asia. Karasavvidis said the firm would focus on those markets for the time being, further establishing itself before looking to enter new markets.

Related news